RBI compares inflation to 'horse' to be kept on tight leash

RBI MPC: The Reserve Bank of India ( RBI ) Governor Shaktikanta Das likened inflation management to keeping a horse in a stable, as the RBI announced its decision to maintain the repo rate at 6.50 per cent for the 10th consecutive time. Das emphasised the need for vigilance, stating that while inflation has been brought close to target, it remains a risk that could "bolt" if not carefully managed.

“The inflation horse has been brought to the stable closer to the target within the tolerance band," Das said. "Now we must be very careful about opening the door, as the horse may simply bolt again if not kept on a tight leash."

The Monetary Policy Committee (MPC) noted a downward trajectory in headline inflation, but cautioned that fluctuations could arise, especially from food prices influenced by recent crop yields and weather conditions. Das highlighted positive signals from strong kharif crops but warned that adverse weather could disrupt this outlook.

On the economic front, Das projected a robust real GDP growth rate of 7.2 per cent for the fiscal year 2024-25, with expectations of steady growth across quarters. Specifically, he forecasted growth rates of 7.2 per cent for Q2, increasing to 7.4 per cent in Q3 and Q4, and a slight drop to 7.3 per cent in the first quarter of FY26.

Regarding inflation, he projected an average rate of 4.5 per cent for FY25, with quarterly estimates at 4.1 per cent for Q2, 4.8 per cent for Q3, 4.2 per cent for Q4, and 4.3 per cent for Q1 of FY26. While he noted signs of durable disinflation, Das warned against complacency, highlighting ongoing risks from geopolitical conflicts and commodity price fluctuations.

As the RBI navigates these challenges, the focus remains on maintaining economic stability while fostering growth.